1Q delivered a high margin, reaching 32% of the full-year operating profit plan; H1 will test its sustainability

In 1Q from April to June 2026, revenue was ¥281,016 million, down 4.2% year on year, while operating profit was ¥102,846 million, up 1.0%. Ordinary profit was ¥108,735 million and profit attributable to owners of the parent was ¥85,161 million, up 3.3% and 15.4%, respectively. The supplementary earnings materials showed an operating margin of 36.6% and a gross margin of 42.7%, indicating that margins remained high even as revenue declined.

The full-year forecasts are revenue of ¥1,070,000 million, operating profit of ¥320,000 million, ordinary profit of ¥300,000 million, and net profit of ¥223,000 million. Progress at the 1Q stage was approximately 26%, 32%, 36%, and 38%, respectively. If simply half of the full-year forecast is used as the H1 benchmark, revenue of ¥535,000 million and operating profit of ¥160,000 million would provide comparison points. However, the company has not disclosed the amounts required over the remaining period or the assumptions underlying quarterly profit recognition, so this 50% level should be treated as a monitoring benchmark rather than a company target.

The factors behind the high margins include improved occupancy at existing buildings, the penetration of rent increases, and higher selling prices in real estate sales. 1Q SG&A expenses were ¥17,236 million, only approximately 19% of the full-year forecast of ¥90,000 million, while full-year gross profit is forecast at ¥410,000 million. In H1, it will be necessary to assess whether the improvement in gross margin continues and whether SG&A expenses increase because of higher hiring, personnel costs, and sales activity, both company-wide and in the rental, sales, housing, and Step businesses.

The 1Q supplementary earnings materials did not disclose progress against the full-year forecast, the company’s own assessment against its plan, the assumptions underlying its earnings outlook, the monetary impact of risks, or the level of performance required over the remaining period. To determine whether operating profit can continue to increase despite lower revenue, H1 materials will need to be checked for segment-level factors behind changes, breakdowns of gross profit and SG&A expenses, and whether the forecasts have been maintained or revised.